Netanyahu looks to buy Palestinian gas

The approach to the Palestinians was made a few days after Egyptian gas deliveries were halted due to an attack on the Sinai pipeline.

Sources inform ''Globes'' that Prime Minister Benjamin Netanyahu has officially asked Palestinian Authority President Mahmoud Abbas (Abu-Mazen) to resume negotiations for Israel to buy Palestinian natural gas. The approach was made a few days after an explosion on a pipeline in Sinai halted deliveries of Egyptian natural gas to Israel on February 5.

Israel proposes that negotiations discuss development of the Gaza Marine offshore natural gas field, and the Noa gas field offshore from Ashkelon, part of which is located in Palestinian waters. BG Group plc (LSE; NYSE: BG) owns 60% of the Gaza Marine license, Consolidated Contractors Company (CCC), owned by Lebanon’s Houri family owns 30%, and the Palestinian Investment Fund (PIF) owns 10%. Noble Energy Inc. (NYSE: NBL) owns 47% of the Noa license and Yitzhak Tshuva-controlled Delek Group Ltd. (TASE: DLEKG) owns the rest through subsidiaries Delek Investments and Properties Ltd., Avner Oil and Gas LP (TASE: AVNR.L), and Delek Drilling LP (TASE: DEDR.L).

No agreement was reached in two previous rounds of talks between Israel and the Palestinian Authority. The first round of talks began in 2000, shortly after BG Group discovered the gas field. Israel Electric Corporation (IEC) (TASE: ELEC.B22) wanted to buy gas from the reserves, but then-Prime Minister Ariel Sharon opposed a deal. Then-Minister of National Infrastructures Yosef Paritzky supported a deal, arguing that Israel could not rely on Egyptian gas, and needed a third supplier, in addition to Delek Group and Noble Energy's Yam Tethys reserves offshore from Ashkelon. Negotiations collapsed in 2005 after Paritzky was forced to resign in an embarrassing scandal.

The second round of talks began under Prime Minister Ehud Olmert, but collapsed in 2007 in a dispute over prices.

Hezi Kugler, who served as Ministry of National Infrastructures director general at the time, told "Globes" today that the gap between Israel and the Palestinians was only $0.20. "I said at the time that Palestinian gas was the perfect mezzanine solution; in other words, an interim solution for 2011-13. That is less relevant now because gas from Tamar will flow by then."

The Marine Gaza field has an estimated 40 billion cubic meters of natural gas, and would cost between $800 million and $1 billion to develop. Development would take 30-36 months.

The Noa field has an estimated 7-8 billion cubic meters of natural gas. It's main advantage over the Marine Gaza field is its proximity to Yam Tethys, which already produces gas from the Mari B well. This proximity will reportedly enable development of the Noa field within a year from a decision to do so, and at a relatively low cost of $200 million. Nobel Energy and Delek have refused to develop the field to date on the grounds that it is not worthwhile. So far as is known, no feasibility study has been carried out on commercial production from the field.

Published by Globes [online], Israel business news - www.globes-online.com - on March 6, 2011

© Copyright of Globes Publisher Itonut (1983) Ltd. 2011

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